Transport Minister rolls back First Minister’s commitment to not unbundling west coast ferry routes

Public anxiety on the west coast of Scotland has been growing over the Scottish Government’s intentions for the delivery of the Clyde and Hebridean Ferry Services.

These are the ‘lifeline services’, shortly to go to tender [?] and currently delivered as a single contracted obligation by the state owned operator, Caledonian Ferries Limited, or CalMac.

There are two core issues of concern on what lies ahead:

whether the services currently delivered through a single contract will continue to be tendered that way or ‘unbundled’ and offered as a series of potentially free standing contracts;

whether, if they are to be tendered as one contract, the current operator will be – not to put too fine a point on it – forced out of business by its own owner, the Scottish Government, in the deliberate award of the contract to a private sector competitor.

This is no unhinged flight of imagination. In May this year, a surprise award of the Northern Isles Ferry Services was made to a private sector company, Serco. The incumbent, CalMac’s sister state owned company NorthLink, lost and two months later had ceased to exist. The circumstances surrounding the letting of this contract were and remain strange. But whatever else, the management of that contract indicates an unmistakable direction of travel in the Scottish Government’s intent for the delivery of the west coast services.

The First Minister’s statements

As public attention to this subject began to intensify, the First Minister recently felt it necessary to announce, in the way of politicians, that the government had ‘no plans’ to unbundle the west coast ferry services. Who does not know what that means – and does not mean?

Days later, on 11th September, in response to an oral parliamentary question on security of employment of CalMac staff from Dave Thompson MSP, Mr Salmond was unequivocal that the routes would not be unbundled but would be tendered as a single contract. The nuancing in the exchanges between First Minister and questioning MSP of his own party was such as to indicate that neither were envisaging the current operator continuing.

That exchange did, however, seem to settle the first issue identified above. The government was not going to unbundle the routes and was not going to entertain the spectacle of multiple operators delivering the lifeline west coast services between them.

Transport Minister’s statement

Then, on Tuesday 18th September, Transport Minister Keith Brown issued the following statement on the tendering of Clyde and Hebrides ferry services, having just spoken on the subject in the Scottish Parliament:

‘The Scottish Government is absolutely committed to supporting our island communities and we are continuing to invest millions in new cutting edge ferries, ports and harbours fit for the 21st century.

‘Despite deep budget cuts by Westminster, our record investment in new cutting edge technology is delivering modern ferries such as the £25 million MV Finlaggan, the two new cutting-edge hybrid vessels under construction on the Clyde and a £42 million ferry for the Stornoway-Ullapool route

‘As I said in my statement of 5 September to the Chamber, on the subject of Ferries to Orkney, our next challenge is the replacement of the contract for the Clyde and Hebrides Ferry Services which expires in October next year.

‘Despite recent speculation, no final decisions have been made regarding the Clyde and Hebridean Ferry Service (CHFS) tender. We are currently considering our approach to fulfilling the tendering requirements to ensure we can deliver a ferry service that matches our aspirations.

‘We will be announcing our plans for the procurement of the next contract soon and we can assure local communities, ferry users and the service providers that, as well as Parliament, they will be among the first to be informed of our final decision.

‘By the end of this, we will fulfil our promise to publish the Final Ferries Plan and this provide a blueprint for improvements to ferry services across the country. This plan will set down the foundation for a programme of investments that clearly demonstrates our commitment to our island communities and to the ferries serving them.’

Dissecting the Transport Minister’s statement

The big issue here is that this statement is obviously rolling back what the First Minister had publicly said about not unbundling the routes. The door Mr Salmond closed has here been reopened by the Transport Minister who says, in writing , that ‘no final decisions have been made regarding the Clyde and Hebridean Ferry Service (CHFS) tender.’

No one should imagine that this reversal can be happening without the First Minister’s agreement. He clearly needed Brown to fill in the hole he’d dug.

So multiple operators were never out of the frame. Scotland’s west coast ferry services could be headed for the same impenetrable morass as England’s train services.

Let’s discount from Mr Brown’s statement everything related to the now tedious mantra trotted out by all government ministers these days, on all occasions, relevant or not, about how different things might be if it wasn’t for Westminster’s cuts. Governments are elected to govern as best they can in the present moment, making the best strategic use of what is available now.

Then let’s discount all expressions of commitment to communities, services and aspirations. They mean nothing to politicians. They use them as decoy devices to distract the attention of the gullible and make them feel warm.

The first remark of substance in the statement is: ‘…our next challenge is the replacement of the contract for the Clyde and Hebrides Ferry Services which expires in October next year’. It is indeed – unless they do as we have said we believe they will and postpone the tender until safely after the independence referendum in the Autumn of 2014.

The Minister”s declaration: ‘no final decisions have been made regarding the Clyde and Hebridean Ferry Service (CHFS) tender’ is clearly intended to reassure. Why should it? How long have they had to think about this matter? The answer is – from half way through their first administration. The Scottish Ferries Review process began way back in 2009.

Three years to work out a strategy for anything has to be on or over the maximum in an electoral system based on four year terms where no party can count on more than that.

If the government have indeed not yet come to any conclusions on how they see these lifeline services delivered, what has Transport Scotland been doing for the past three years? The Ferries Review has been trundling on and the final document should have been published by now.

This is the document that is to lay out the strategy the government has adopted from the review process for the delivery of, they say, ‘improvements to ferry services across the country’ – following a prolonged gestation period.

What that strategy should lead to is the framing of the tendering of west coast services delivery. But, as far too often, strategy here is to be retrospective rather than guiding implementation as it is supposed to do.

The government, as the Transport Minister admits in this statement, is going to do what it wants to do first – and then afterwards make the strategy fit whatever that is. And then publish that strategy.

Cart. Horse. Or horse and cart in retreat.

Mr Brown says [and the emphases are ours]: ‘We will be announcing our plans for the procurement of the next contract soon and we can assure local communities, ferry users and the service providers that, as well as Parliament, they will be among the first to be informed of our final decision.

‘By the end of this, we will fulfil our promise to publish the Final Ferries Plan and thus provide a blueprint for improvements to ferry services across the country. This plan will set down the foundation for a programme of investments that clearly demonstrates our commitment to our island communities and to the ferries serving them.’

What – exactly – do you do with ‘a blueprint for improvements to ferry services across the country’, when you have already issued a tender or tenders whose shape and outcome will become that blueprint?

This can mean only one of two things. They know what they’re doing or they don’t – but they certainly know what they want to do and they’re going to do it regardless. Some sort of a fudge of a document will emerge at some point – bare of strategy [for whose existence there is no evidence] but morphed into a logistics summary, descending from what has already been set in place in the procurement exercise.

The bottom line

If the government does, as we expect – seek to protect the ‘Yes’ votes in the 2014 Independence Referendum by finding some reason to postpone the tendering of the west coast services until after that - it can mean only one thing. They know that what they are determined to do will lose them votes.

Whatever reason they might advance to justify this delay would be fascinating – given how long they have been running the Review – and would receive vigorous scrutiny.

But how would they defend, as they would need to do, a delay to both the tendering and the publication of the Review – which the Transport Minister has now committed to follow rather than precede the tendering?

Supposing they postponed the procurement until some time in 2015, after an October 2014 vote; and tried to convince people that the Review should naturally be published after that – how do they excuse a ferries review process which would then have taken over six years from its inception, producing nothing but a draft review which is a message to Santa Claus without one shred of strategy in it?

The reality is that the failure to create a strategy for the lifeline west coast ferry services has arisen because the government has for some time now put governing in a poor second place to the promotion of independence.

This is a failure to understand that the basis of the support they have had was their competence in government, when they once paid attention to governing.

Note: This is the first of two articles examining the situation around the whenever tendering of the west coast lifeline ferry services. The second will be published some time later today. It will focus on the evidence for the government’s intent, the proof of absence of strategy and the position of Caledonian Ferries Limited.

21 Responses to Transport Minister rolls back First Minister’s commitment to not unbundling west coast ferry routes

Give us a break; what is the point of all this speculation when the proposal will be published shortly and at that point you and everyone else can comment and criticise.

You seem to be drifting from news and comment just to comment on something which has not even been published.

There are other issues to highlight and challenge where the meat is already on the bone. Here are a few to be going on with:

1 councillors having to re-write officials reports because the officials are not up to the job. 2 who actually owns Faslane and the consequences of that ownership? 3 is the National Park aw waste of public funds and working against the interests of the communities it is suppose to serve and enhance? 4 would the introduction of a land value rental scheme in Scotland but particularly in Argyll and Bute benefit us economically, socially and environmentally? 5 what departments and agencies of state should Argyll and Bute communities bid for when these are repatriated on Independence as part of a national spatial strategy? 6 how can we increase population of A & B amongst working age people and their young families? 7 is there a case for the establishment of an Atlantic College in Argyll to bring representatives of all countries who border the ocean together to discuss the challenges and opportunities and matters of common and consequential interest? 8 how can Argyll and Bute profit from the opening up of the North West Passage?

I like the idea of an Atlantic College and SAMS is in many ways the nucleus of such a college given its increasing activity in the arena of marine policy and social interactions. That may also help address your last point about the now not so mythical North West passage.

These would be some interesting discussion points for sure. No.1 if true fails entirely to surprise me. I haven’t much view on no 2 & 3. No.4 land value rental – can you explain what this means? 4 & 6 are the most pressing for me, and I like the idea of no. 7!

Equating the outcome of the tendering of the Northern Isles ferry services to a clear intention of the SG towards the Clyde and Hebridean services is a bit tenuous. State involvement in the Northern isles services dates back only to 2002 and then only partially as the original North Link Ferries was a joint venture between the state owned Cal Mac and private sector RBoS. This ran into problems and the contract was re-tendered in 2006 which Cal Mac (acting alone) won against private sector opposition. Awarding the latest contract to Serco Group merely put the service back into private hands from which it partially moved in 2002 when CalMac/RBoS took over from P&O.

The Clyde and Hebridean services have, in contrast, been in state control since 1948. Privitisation of this bundle of services would be a major departure from the past and Cal Mac has already won through one tendering process in the new era of EU rules on state subsidies for maritime transport.

So, I’m unconvinced that the Northern Isles tender has much relevance to the C&H tender with regard to Government policy.

You conjure this story up from a dog that hasn’t barked. Mr Salmond has said that the C&H routes will not be unbundled. Mr Brown hasn’t said anything to the contrary but because he hasn’t parroted Mr Salmond you view this as evidence of rolling back Mr Salmond’s statement.

I think I’ll wait and see what transpires before reaching any conclusions about Government intentions but for the moment I am happy to believe that the policy of the SG is to tender the C&H routes as a single tender because that is the only definitive statement that the Government seems to have made.

EU tendering rules are a minefield for governments. It forces them to ca canny but ca awa in terms of public pronouncements. I know you will find it staggeringly naive but there is the possibility at least that the SG’s machinations on this issue has nothing to do with the independence referendum and rather more to do with ensuring that the islanders on our West Coast receive the best possible ferry services that the SG can engineer without risking the ire of Brussels.

Bit weird responding to my own post but today the SG confirmed that the C&H routes will not be unbundled – which is what Mr Salmond said but which Newsroom called foul on because the Transport Minister didn’t use the same words as Mr Salmond. Sometimes politicians mean what they say and in my experience this is true of the First Minister more often than most.

One of the things I learnt early on a science undergraduate was not to over-interpret data or, to quote Freud, sometimes a cigar is just a cigar.

What is Land Value Taxation? Land Value Taxation is a method of raising public revenue by means of an annual charge on the rental value of land.

Although described as a tax, it is not really a tax at all, but a payment for benefits received. It would replace, not add to, existing taxes.

Properly applied, Land Value Tax would support a whole range of social and economic initiatives, including housing, transport and other infrastructural investments. It is an elementary fiscal measure that would go far towards correcting fundamental economic and social ills.

The value of every parcel of land in Britain would be assessed regularly and the land value tax levied as a percentage of those assessed values.

“Land” means the site alone, not counting any improvements. The value of buildings, crops, drainage or any other works which people have erected or carried out on each plot of land would be ignored, but it would be assumed that all neighbouring properties were developed as at the time of the valuation; other things being equal, a vacant site in a row of houses would be assessed at the same value as the adjacent sites occupied by houses.

The valuation would be based on market evidence, in accordance with the optimum use of the land within the planning regulations. If the current planning restrictions on the use were altered, the site would be reassessed. The advantages…

A NATURAL SOURCE OF PUBLIC REVENUE. All land makes its full contribution to the Exchequer, allowing reductions in existing taxes on labour and enterprise. A STRONGER ECONOMY. If we tax labour, buildings or machinery and plant, we discourage people from constructive and beneficial activities and penalise enterprise and efficiency. The reverse is the case with a tax on land values, which is payable regardless of whether or how well the land is actually used. It is a payment, based on current market value, for the exclusive occupation of a piece of land. In the longer term, this fundamentally new and different approach to revenue raising will stimulate new business and new employment, reducing the need for costly government welfare. MARGINAL AREAS REVITALISED. Economic actitivities are handicapped by distance from the major centres of population. Conventional taxes such as VAT and those on transport fuels cause particular damage to the remoter areas of the country. Land Value Tax, by definition, bears lightly or not at all where land has little or no value, thereby stimulating economic activity away from the centre – it creates what are in effect tax havens exactly where they are most needed. A MORE EFFICIENT LAND MARKET. The necessity to pay the tax obliges landowners to develop vacant and under-used land properly or to make way for others who will. LESS URBAN SPRAWL. Land Value Taxation deters speculative land holding. Thus dilapidated inner-city areas are returned to good use, reducing the pressure for building on green-field sites. LESS BUREAUCRACY. The complexities of Income Tax, Inheritance Tax, Capital Gains Tax and VAT are well known. By contrast, Land Value Tax is straightforward. Once the system has settled down, landholders will not be faced with complicated forms and demands for information. Revaluation will become relatively simple. NO AVOIDANCE OR EVASION. Land cannot be hidden, removed to a tax haven or concealed in an electronic data system. AN END TO BOOM-SLUMP CYCLES. Speculation in land value – frequently misrepresented and disguised as “property” or “asset” speculation – is the root cause of unsustainable booms which result periodically in damaging corrective slumps. Land Value Taxation, fully and properly applied, knocks the speculative element out of land pricing. IMPOSSIBLE TO PASS ON IN HIGHER PRICES, LOWER WAGES OR HIGHER RENTS. Competition makes it impossible for a business producing goods on a valuable site to charge more per item than one producing similar goods on less valuable land – after all, producers and traders at different locations are paying different rents to landlords now, yet like goods generally sell for much the same price and employers pay their workers comparable wages. The tax cannot be passed on to a tenant who is already paying the full market rent. AN ESTABLISHED AND PROVEN SYSTEM. Local government variants of Land Value Taxation, known as Site Value Rating, are accepted practice in, for example, Denmark and Australia.

Henry George published a book about this and there use to be groups in Glasgow many years ago promoting this. I was told the old Liberals had this on their agenda many years ago too. Took me ages to get my head round this as its a total sea change and so simple. It was talked about trying it out in London with the building of a new Tube line, that was a good few years ago. The few with the power and land will stop this at all cost as they could not pay the true value of land owning to the people.

Let’s be brutally honest , the SNP are reliant on people voting for them in the 2014 Debacle and are cynical enough to give everyone what they want at the moment , then after , if they are lucky enough to win anything at all , they will simply do exactly what they want afterwards. The people of the West Highlands and Islands should be equally cynical about them as far as their ferry services are concerned and treat the nationalists as untrustworthy.

On a point of information, the Hebridean and Clyde services were not, as a previous poster stated, nationalised in 1948. MacBrayne was 50% privately owned (by Coast Lines Ltd) until the formation of Calmac in 1970. In turn, Coast Lines, including Orkney and Shetland’s “North Line” were taken over by P&O Ferries a year later. Some may have seen it as only natural and fitting then, when nationalised Calmac, with ship leasing facilities provided by RBS, finally ousted P&O in the tendering process of 1999 but what a fiasco the NorthLink project proved to be! Has anyone totted up the total cost to the taxpayer of the bailouts by comparison with the deal offered by the established private sector operator in the first place? When the demise of Caledonian MacBrayne is finally written up, the embarassment which was NorthLink, its illumination of the degree of competence of the management and board of the holding company, David MacBrayne Ltd, and more important, the humiliation of civil servants and politicians, will be seen to be the tipping point.

Peter: It is indeed a tangled skein in terms of ownership but here is what CalMac’s own history page says:

“Thanks to a rescue operation [of MacBraynes] jointly with LMS Railway and Coast Lines Ltd a new company was formed – David MacBrayne (1928). 1948 saw the nationalisation of the LMS shares in the company and the acquisition of the ships. Five years later the state-owned Scottish Transport Group was formed to operate not only MacBrayne’s but also the Caledonian Steam Packet Company on the Clyde together with the dominant Scottish Bus Company.”

There are two separate issues going on here:

1: maintaining the Clyde and Hebridean ferry services as a bundled and unified operation.

2: maintaining the C&H operation under state control.

I think the first is very desirable but on the second I an quite agnostic.

I have extracted this from the summary of a paper presented to the European Transport Conference 2002;

In Norway today, about 150 ferries service a total of about 100 routes. The ferries are run by 20 different transport companies and half of their total costs are covered by subsidies from the central authorities. Because the ferries are regarded as important factors of the road network, the central responsibility for these services and the distribution of subsidies to the operators, lies with the Directorate of Roads.

An avowed policy has been that the fare level should be the same all over the country; i.e. it should cost the same throughout the country to travel a certain distance with a specific vehicle.

The aim of this paper is to present the results from the report. First we briefly review the present fare system. Thereafter, we develop a cost model for the ferries which enables us to infer how long-run marginal costs of carrying different type of vehicles vary with the travelling distance. The long-run marginal costs are, thus split into two cost components; one which is independent of the travelling distance (boarding and alighting costs) and another which increases with the travelling distance.

It’s basically a Road Equivalency Tariff. They seem to retain the terminals in state ownership as extensions of the road network, and take pains to keep the linkspans etc. to a common design in order to simplify vessel requirements for prospective new contractors.

Douglas, you’re right. I’ve had a look at Calmac’s own version of their own corporate history BUT (and this kind of says it all) they’re very wrong. My version is correct, give or take a year. I, too, used to be agnostic re ownership. Regarding the objections to fracturing of the group: yesterday I saw the perceived advantages of being big and being in public ownership failing to work in the operation of the Wemyss Bay – Rothesay service. With one of the ferries out of action for “technical” reasons, the spare vessel, Isle of Arran, had been drafted in. More accurately, it is mostly lying idle at Rothesay pier. A very restricted timetable is in operation, extending over several days. When I drove off the ferry at Wemyss Bay yesterday, the vehicle queue filled the waiting area and extended well out into the middle of the main road. Meanwhile, the Arran sat idle. And this on the Glasgow holiday weekend. How may day trippers turned back? Rothesay needs Western Ferries. When is a timetable not a timetable? When is a spare vessel not spare? When is a public service not a public service?

I claim no expertise on the ownership of history of Cal Mac – I just relate what I read.

Nor should that distract us from discussion of the real issues. I would say that discussion of the relative merits of private v public ownership are, in this case, a bit arcane. We are really left with discussing the relative merits of private v public monopolies since very few of the C&H routes are likely ever to enjoy competitive services of the sort found in Dunoon. I say I’m agnostic on this issue as there are no reasons why a well run publicly owned ferry service cannot be as good as a privately owned one and vice versa.

The question of bundling (or not) is more interesting. The advantages of a bundled service lie (it would seem) mostly in the ability to move ships from the fleet around to points of need and the ability to offer a coherent network. This latter point mostly affects tourism rather than day to day travel but should not be slighted because of that. Cal Mac has to be seen as part of the tourism infrastructure and the ability to wander around the West Coast on a multiple trip travel ticket should not be underestimated.

You could get round the vessel question in an unbundled operation by having all the operators hire their vessels from a second party that provides all the ships and charges sufficiently enough to ensure that a strategic reserve is maintained for the benefit of all.

But to me the most compelling reason for maintaining the operation as a bundled service is the ability to project and offer a coherent service offering, particularly for tourists.

As you correctly allude to, what really matters is good management. Cal Mac’s management need the threat of competition every six years or so to ensure they stay on the ball. Ensuring that there is competition is obviously harder when competitors have to bid for the whole bundled network but I don’t see the alternative of unbundling the network actually delivering best value for the customers.

It’s easy to sympathise with Calmac – losing the use of one of their newer ferries just when it’s most needed – but the current problem also shows up a less impressive aspect of their management culture: they’re telling their customers that there’s a ‘technical issue’. Do they really not know the problem, is it too complex for the public to comprehend – or is it perhaps quite serious, and they’r trying to pretend it isn’t? I think the people who rely on this service are grown up enough to be told what’s going on.

I’d take a stab at suggesting that the crew from the ‘Bute’ is not large enough for the ‘Isle of Arran’, which is a much bigger ship. It’s not definitive, but a google search suggests ‘Bute’ has a crew of 10, while the ‘Isle of Arran’ has 20. Inconveniencing the populace of Bute is worth less than the cost of 10 temporary crew.

How about unbundling to this extent: take all the C&H ferry terminals into public ownership entirely separate from Calmac and open up access to all comers. In almost every case, the construction of these facilities was paid for entirely out of public funds and therefore they should be seen as an extension of the public roads. The cost of entry to competition is very largely the cost, or even physical impossibility, of dupicating the shore infrastructure. Ships can be moved or sold off; link spans and waiting rooms can’t. Some years ago, the Monopolies Commission reviewed Calmac’s operations (plainly a monopoly) and made a number of strong recommendations. One of these was that any growth in demand on the Arran service should be met by providing additional vessels and an expanded timetable, summer and winter. What did Calmac do? They built, out of public funds, the bigger Caley Isles and simultaneously CUT the winter timetable. Nothing would have kept Calmac’s management on their toes so much as a competitor sailing from Ardrossan to Brodick, soaking up the growing demand and using “their” terminal facilities. My experience of Calmac has always been that the ferries are “on patrol”, massively subsidised, and if the service ties in with the customers’ needs, good. If not, tough – e.g., see Arran case, above. Is it reasonable to expect Calmac’s management to have the incentive to do much more than to offer the minimum of service whilst minimising the company’s loss/subsidy element? After all, what’s in it for them? The problem of the future operation of ferry services raises a wider issue (and the land tax post relates to this). Are the Clyde and Hebridean communities served by these services to be forever in need of transport subsidy? I don’t say they should or shouldn’t, any more than I would of Glasgow rail commuters, but surely the bigger question is, why are so many of the communities served by Calmac economically moribund? Chicken/egg: underdeveloped local economies/decades of mediocre ferry services? Only a thought …

Haha! 2014 it is. How convenient eh? Good old Scottish Government – leave the unpopular decisions until after crucial votes. Clever (arguably), but it’s becoming so obvious now, it’s hard to cover this one up as anything else.

Let’s hope affected voters will realise, with benefit of hindsight, that they are being taken for a ride.